Chegg, an online education firm offering textbook rentals, homework help, and tutoring, has been grappling with a decline in web traffic for months. The company warned that this trend would likely worsen before improving. Chegg attributes the decrease in demand to students increasingly turning to AI-powered tools such as ChatGPT over traditional edtech platforms.
Key Points:
- Chegg to lay off 22% of its workforce, impacting 248 employees.
- The company cites competition from AI tools like ChatGPT and Google’s AI Overviews as a primary reason.
- Chegg plans to close its U.S. and Canada offices by year-end and reduce marketing and product development expenses.
In response, Chegg announced on Monday that it will lay off approximately 22% of its workforce, or 248 employees, to cut costs and streamline operations. The company also plans to shut its U.S. and Canada offices by reduce marketing, product development, and administrative expenses. The restructuring is expected to incur charges between $34 million and $38 million in the next two quarters but aims to save $45–$55 million in 2025–$110 million in 2026.
Chegg’s first-quarter 2025 results show a 31% drop in subscribers to 3.2 million and a 30% decline in revenue to $121 million. In February, Chegg filed a lawsuit against Google, accusing it of using AI-generated summaries to reduce search traffic to original content, further impacting its user base and profitability.
Chegg’s CEO, Nathan Schultz, acknowledged the challenges, stating that macroeconomic trends and AI competition are putting pressure on the company. Despite these challenges, Chegg’s stock rose 4.8% following the announcement.
The layoffs and restructuring efforts highlight the significant impact of AI tools on traditional educational platforms. As students increasingly rely on AI-powered solutions for academic assistance, companies like Chegg must adapt to the evolving landscape to remain competitive.